GigaMedia Announces Second-Quarter 2013 Financial Results

GigaMedia Announces Second-Quarter 2013 Financial Results
PR Newswire
TAIPEI, Aug. 22, 2013
TAIPEI, Aug. 22, 2013 /PRNewswire/ --GigaMedia Limited (NASDAQ: GIGM) today
announced its unaudited financial results for the second quarter of 2013.
"We are continuing to make good progress in lowering our cost structure,"
stated GigaMedia Limited Chief Executive Officer Collin Hwang. "Operating
expenses were a record low in Q2; we have cut our operating expenses nearly 40
percent from Q4 last year, when excluding the Q4 goodwill impairment."
"The next step in our turnaround is driving revenue growth," stated CEO Collin
Hwang. "We expect to start driving growth and better performance by leveraging
our strengths in social casino games and a new cutting-edge games platform
that will be operating near year-end."
"We are actively reviewing several strategic transactions that would allow us
to maximize our opportunities and accelerate the transformation of our games
business," stated CEO Collin Hwang. "We look forward to sharing more over the
next six months on the development of our new games platform and business
model."
"We also expect to begin seeing revenue contributions from our new cloud
business after we begin marketing in late 2013," stated CEO Collin Hwang. "In
sum, while it is going to take time to correct the mistakes of the past, we
are confident we are on track to delivering sustainable growth and enhanced
shareholder value."
Second-Quarter Overview
oFunTown's MMO game A.V.A. outpaced expectations in the second quarter; its
revenue contributions were up 19 percent year-over-year, helping to offset
a decrease in contributions from FunTown's PC-based casual games. A.V.A.
continues to be one of the most popular first-person-shooter MMOs in
Taiwan.
oTo drive growth, FunTown continued developing a new game platform in
preparation for the launch in late 2013 of new self-developed games in the
high-growth Web and mobile games market.
oConsolidated general and administrative expenses continued trending down,
decreasing 7 percent quarter-over-quarter and 55 percent year-over-year.
oRecord-low headquarters operating expenses, down 27 percent
quarter-over-quarter and 54 percent year-over-year.
oCash outflow from operations of approximately $300 thousand, excluding
cash received of $3.2 million related to the disposal of a non-strategic
legacy investment.
oCash, cash equivalents, and marketable securities-current decreased
approximately $4.8million sequentially to approximately $73.0 million;
during the second quarter of 2013, GigaMedia fully repaid its short-term
borrowings, which amounted to approximately $7.6 million at the end of the
first quarter of 2013.
2013 Turnaround Overview
oRestructuring, cost controls and team incentive programs implemented over
the past two quarters by new management are helping to address the
challenges of a general market decline in GigaMedia's legacy PC-based
games business and create a leaner business, better positioned to deliver
sustainable growth and profitability.
oGeneral and administrative expenses have decreased approximately 31
percent since the fourth quarter of 2012.
oCorporate operating expenses have decreased approximately 49 percent since
the end of last year.
oLoss from operations has decreased approximately 47 percent from the
fourth quarter of 2012, when excluding the goodwill impairment in the
fourth quarter of 2012.
oManagement plans to begin launches of new social casino games late in the
fourth quarter of 2013. The games will be in browser and mobile format,
positioning GigaMedia to benefit from strong growth trends in these
markets. (See GigaMedia's June 25 announcement for details.)
Recent Developments
oNew auditors: Shareholders have approved the engagement of global leader
KPMG. The firm has offices in Taiwan, which will facilitate rapid,
efficient collaboration with GigaMedia. The change of auditors to KPMG is
part of new management's initiatives to enhance shareholder value.
Unaudited Consolidated Financial Results
GigaMedia Limited is a diversified provider of online games and cloud
computing services. GigaMedia's online games business FunTown develops and
operates a suite of games in Taiwan and Hong Kong, with focus on
Web-based/mobile social casino games. GigaMedia's cloud computing business
GigaCloud was launched in early April 2013 and is focused on providing SMEs in
Greater China with critical communications services and IT solutions that
increase flexibility, efficiency and competitiveness.
Unaudited consolidated results of GigaMedia are summarized in the table below.
GIGAMEDIA 2Q13 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
(unaudited, all figures in US$ Change Change
thousands, except per share 2Q13 1Q13 (%) 2Q13 2Q12 (%)
amounts)
Revenues 3,654 4,187 -13 3,654 7,129 -49
Gross Profit 1,928 2,333 -17 1,928 3,852 -50
Loss from Operations 1,325 1,268 -5 1,325 2,539 48
Net Income (Loss) Attributable to 84 (1,389) NA 84 (3,454) NA
GigaMedia
Net Loss Per Share Attributable 0.00 0.03 NA 0.00 0.07 NA
to GigaMedia, Diluted
EBITDA ^ ^(A) ^ 642 (817) NA 642 (2,124) NA
Cash, Cash Equivalents,
Restricted Cash, and Marketable 72,960 77,832 -6 72,960 94,810 -23
Securities-Current
^(A) EBITDA (earnings before interest, taxes, depreciation, and amortization)
is provided as a supplement to results provided in accordance with U.S.
generally accepted accounting principles ("GAAP"). (See, "Use of Non-GAAP
Measures," for more details.) ^
Consolidated revenues for the second quarter of 2013 were $3.7 million; this
compared to $4.2million in the first quarter of 2013 and $7.1 million in the
second quarter of 2012. Quarter-over-quarter results reflected seasonally
softer demand for casual online games; the approximately $533thousand
decrease from the first quarter was less than expected due to strong
contributions by A.V.A. during the second quarter, which were 19 percent
higher than the same period last year. Year-over-year results reflected the
effect on Giga's currently PC-based online games business of the continuing
shift in player preferences for browser/mobile games, as well as the
deconsolidation of IAHGames revenues following the disposal of a majority
ownership interest in IAHGames in August 2012.
In response to market trends, GigaMedia is currently developing a suite of
browser/mobile-based social casino games and plans to begin offering these
games to its userbase near the end of 2013.
Average monthly revenue per active paying account was $27.76 during the second
quarter of 2013, down 6 percent from the previous quarter. Peak concurrent
users remained steady quarter-over-quarter at approximately 23,000.
Consolidated gross profit for the second quarter of 2013 was $1.9 million
compared to $2.3 million in the first quarter of 2013 and to $3.9 million in
the second quarter of 2012. Second-quarter 2013 consolidated gross profit
margin was 52.8 percent compared to 55.7 percent in the first quarter of 2013
and 54.0 percent in the same period in 2012.
Consolidated operating expenses for the second quarter of 2013 continued to
trend down and reached a record low, reflecting benefits from implementation
of productivity initiatives and ongoing strong cost controls. Consolidated
operating expenses in the second quarter were $3.3 million compared to $3.6
million in the first quarter of 2013 and to $6.4 million in the second quarter
of 2012.
Consolidated product development and engineering expenses were $319 thousand
in the second quarter of 2013 compared to $372 thousand in the previous
quarter and $280 thousand in the second quarter of 2012.
Consolidated selling and marketing expenses were $1.2 million in the second
quarter of 2013 compared to $1.4 million in the previous quarter and $2.3
million in the second quarter of 2012.
Consolidated general and administrative expenses were $1.7 million in the
second quarter versus $1.8 million in the previous quarter and $3.8 million in
the second quarter of 2012. Corporate operating expenses were a record low
$990 thousand in the second quarter of 2013, down from $1.4million in the
first quarter of 2013.
Consolidated loss from operations for the second quarter of 2013 was $1.3
million. This compared to a loss of $1.3 million in the first quarter of 2013
and $2.5 million in the second quarter of 2012. The year-over-year variation
primarily reflected the aforementioned factors affecting revenues and costs
and expenses.
Consolidated non-operating expenses/income during the second quarter of 2013
was income of $1.4million compared to expenses of $137 thousand in the first
quarter of 2013 and income of $429thousand recorded in the second quarter of
2012.
Consolidated net income for the second quarter of 2013 was $84 thousand. This
compared to net losses of $1.4 million in the first quarter of 2013 and $3.5
million in the second quarter of 2012. During the second quarter of 2013,
GigaMedia recorded a gain of $1.2 million related to the disposal of a
non-strategic legacy investment. Excluding the $1.2 million gain, net loss was
$1.1 million in the second quarter of 2013.
Consolidated EBITDA for the second quarter of 2013 was income of $642
thousand. This compared to a loss of $817 thousand in the first quarter of
2013 and to a loss of $2.1 million in the second quarter of 2012.
Cash and Strategic Investments
Cash, cash equivalents, and marketable securities-current were $73.0 million
at the end of the second quarter of 2013 compared to $77.8 million at the end
of the first quarter of 2013. During the second quarter of 2013, GigaMedia
fully repaid its short-term borrowings, which amounted to approximately $7.6
million at the end of the first quarter of 2013.
Business Outlook
The following forward-looking statements reflect GigaMedia's expectations as
of August 22, 2013. Given potential changes in economic conditions and
consumer spending, the evolving nature of online games, and various other risk
factors, including those discussed in the company's 2012 Annual Report on Form
20-F filed with the U.S. Securities and Exchange Commission as referenced
below, actual results may differ materially.
Online games business
GigaMedia is investing in and repositioning its online games business to align
itself with strong growth in browser/mobile games in the social casino sector.
The company is leveraging its expertise in online casino games to develop new
browser/mobile casino games in-house, which it expects to launch beginning in
late 2013. Supporting this, management is also making critical operational
improvements, including upgrading the game server system and integrating the
game testing/development environment to enhance efficiencies and strengthen
operations. Management targets a comprehensive, multi-platform offering of
self-developed browser, mobile and PC-based games by early 2014 delivering
improved financial performance and lower business risk.
Cloud services business
Launched in April 2013, GigaMedia is investing in and positioning its cloud
services business to capitalize on strong opportunities for software as a
service in the SME sector in Greater China and demand for various cloud
services in the region's government sector. GigaMedia plans to expand the
scope, reach, and quality of its cloud offerings in 2013 by developing new
strategic channel and technology partnerships; the strategic cooperation
agreement with global technology firm Atos announced in April 2013 and the
cooperation with the Taipei City government announced in May 2013 represent
initial success. Following the current trial operational period, management
plans to increase marketing in late 2013 to grow its subscriber base.
Third-quarter overview
Management expects mixed results in the third quarter, with a decrease in
GigaMedia's PC-based casual game revenues reflecting market trends in PC-based
casual games, partially offset by an increase in the company's MMO revenues
driven by the traditional seasonal surge in online gaming activity in the
period. Third-quarter operating expenses may be negatively impacted by
non-cash impairments related to legacy MMOgame development projects pursued
by previous management. As a result of the foregoing factors, management
forecasts operating and net losses in the third quarter. This outlook does not
take into consideration anticipated revenue contributions from the launch of
new browser/mobile-based social casino games. Launches of GigaMedia's new
social casino games are planned for late in the fourth quarter of 2013.
Use of Non-GAAP Measures
To supplement GigaMedia's consolidated financial statements presented in
accordance with US GAAP, the company uses the following measure defined as
non-GAAP by the SEC: EBITDA. Management believes that EBITDA (earnings before
interest, taxes, depreciation, and amortization) is a useful supplemental
measure of performance because it excludes certain non-cash items such as
depreciation and amortization and that EBITDA is a measure of performance used
by some investors, equity analysts and others to make informed investment
decisions. EBITDA is not a recognized earnings measure under GAAP and does not
have a standardized meaning. Non-GAAP measures such as EBITDA should be
considered in addition to results prepared in accordance with GAAP, but should
not be considered a substitute for, or superior to, other financial measures
prepared in accordance with GAAP. A limitation of using EBITDA is that it does
not include all items that impact the company's net income for the period.
Reconciliations to the GAAP equivalents of the non-GAAP financial measures are
provided on the attached unaudited financial statements.
About the Numbers in This Release
Quarterly results
All quarterly results referred to in the text, tables and attachments to this
release are unaudited. The financial statements from which the financial
results reported in this press release are derived have been prepared in
accordance with U.S. GAAP, unless otherwise noted as "non-GAAP," and are
presented in U.S. dollars.
Conference Call and Webcast
Management will hold an investor conference call and webcast on Thursday,
August 22, 2013 at 8:00 p.m. Eastern Daylight Time, which is 8:00 a.m. Taipei
Time on August 23, 2013, to discuss GigaMedia's second-quarter 2013
performance.
Dial-in numbers:
U.S.: +1-845-675-0437
International: +65-6723-9381
Passcode: 32907727
A replay will be available from 11:00 p.m. Eastern Standard Time on August 22,
2013 for seven days.
U.S.: +1-646-254-3697
International: +612-8199-0299
Passcode: 32907727
A link to the live and archived webcast will be available at
www.gigamedia.com.
Conference Call Format
The call will consist of brief prepared remarks, followed by live Q&A and
management responses to questions submitted via email. Questions may be sent
in advance to IR@gigamedia.com.tw.
About GigaMedia
Headquartered in Taipei, Taiwan, GigaMedia Limited (Singapore registration
number: 199905474H) is a diversified provider of online games and cloud
computing services. GigaMedia's online games business develops and operates a
suite of games in Taiwan and Hong Kong, with focus on Web-based/mobile social
casino games. The company's cloud computing business is focused on providing
SMEs in Greater China with critical communications services and IT solutions
that increase flexibility, efficiency and competitiveness. More information on
GigaMedia can be obtained from www.gigamedia.com.
The statements included above and elsewhere in this press release that are not
historical in nature are "forward-looking statements" within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements include statements regarding
expected financial performance (as described without limitation in the
"Business Outlook" section and in quotations from management in this press
release) and GigaMedia's strategic and operational plans. These statements are
based on management's current expectations and are subject to risks and
uncertainties and changes in circumstances. There are important factors that
could cause actual results to differ materially from those anticipated in the
forward looking statements, including but not limited to, our ability to
license, develop or acquire additional online games that are appealing to
users, our ability to retain existing online game players and attract new
players, and our ability to launch online games in a timely manner and
pursuant to our anticipated schedule. Further information on risks or other
factors that could cause results to differ is detailed in GigaMedia's Annual
Report on Form 20-F filed in April 2013 and its other filings with the United
States Securities and Exchange Commission.
GIGAMEDIA LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
6/30/2013 3/31/2013 6/30/2012
unaudited unaudited unaudited
USD USD USD
Operating revenues
Asian online game and service revenues 3,652,728 4,186,767 7,128,830
Cloud service revenues 1,351 0 0
3,654,079 4,186,767 7,128,830
Operating costs
Cost of Asian online game and service 1,667,002 1,817,078 3,276,561
revenues
Cost of Cloud service revenues 59,569 36,236 0
1,726,571 1,853,314 3,276,561
Gross profit 1,927,508 2,333,453 3,852,269
Operating expenses
Product development and engineering 319,015 371,519 279,904
expenses
Selling and marketing expenses 1,210,152 1,417,610 2,337,434
General and administrative expenses 1,712,604 1,839,645 3,784,495
Bad debt expenses (recoveries) 11,230 (27,247) (10,315)
3,253,001 3,601,527 6,391,518
Loss from operations (1,325,493) (1,268,074) (2,539,249)
Non-operating income (expense)
Interest income 53,326 50,191 73,548
Gain on sales of marketable securities 0 0 926,063
Interest expense (13,824) (27,237) (408,161)
Foreign exchange loss - net (132,412) (186,438) (193,279)
Gain (loss) on disposal of property, 5 (4,872) (58,992)
plant and equipment
Gain (loss) on equity method 184,281 22,917 (78,150)
investments - net
Gain on disposal of investments 1,219,712 0 0
Other 100,258 8,228 168,156
1,411,346 (137,211) 429,185
Income (loss) from continuing 85,853 (1,405,285) (2,110,064)
operations before income taxes
Income tax (expense) benefit (153) 16,570 (101,417)
Income (loss) from continuing 85,700 (1,388,715) (2,211,481)
operations
Loss from discontinued operations, net (1,937) (345) (1,418,990)
of tax
Net income (loss) 83,763 (1,389,060) (3,630,471)
Less: Net (gain) loss attributable to
noncontrolling interest and subsidiary (7) 0 176,960
preferred shares
Net income (loss) attributable to 83,756 (1,389,060) (3,453,511)
GigaMedia
Loss per share attributable to
GigaMedia
Basic:
Loss from continuing operations 0.00 (0.03) (0.04)
Loss from discontinued operations 0.00 0.00 (0.03)
0.00 (0.03) (0.07)
Diluted:
Loss from continuing operations 0.00 (0.03) (0.04)
Loss from discontinued operations 0.00 0.00 (0.03)
0.00 (0.03) (0.07)
Weighted average shares outstanding:
Basic 50,719,976 50,719,976 50,719,976
Diluted 51,805,045 50,719,976 50,719,976
GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEETS
6/30/2013 3/31/2013 6/30/2012
unaudited unaudited unaudited
USD USD USD
Assets
Current assets
Cash and cash equivalents 55,263,459 60,313,323 55,244,421
Marketable securities - current 17,697,033 17,518,275 37,783,301
Accounts receivable - net 2,081,571 3,630,552 3,930,527
Prepaid expenses 799,026 849,549 996,643
Restricted cash 0 0 1,781,944
Assets held for sale - current 0 0 2,173,312
Other receivables 2,407 2,197 1,314,229
Other current assets 879,752 922,066 816,420
Total current assets 76,723,248 83,235,962 104,040,797
Marketable securities - noncurrent 4,241,916 4,250,550 6,979,696
Investments 5,090,643 5,059,876 5,833,680
Retained ownership of IAHGames 0 0 166,734
Property, plant & equipment - net 1,803,237 1,826,313 2,321,039
Goodwill 16,392,173 16,485,591 28,817,660
Intangible assets - net 14,893,449 15,125,057 15,487,140
Assets held for sale - noncurrent 0 0 2,930,806
Prepaid licensing and royalty fees 7,943,568 8,118,402 9,277,977
Other assets 481,069 2,515,525 673,053
Total assets 127,569,303 136,617,276 176,528,582
Liabilities and equity
Accounts payable 216,125 159,133 407,464
Accrued compensation 771,419 440,810 969,120
Accrued expenses 3,561,367 4,947,557 8,675,494
Short-term borrowings 0 7,542,742 9,346,360
Liabilities held for sale - current 0 0 3,900,461
Other current liabilities 6,858,350 7,396,623 7,342,720
Total current liabilities 11,407,261 20,486,865 30,641,619
Liabilities held for sale - noncurrent 0 0 536,723
Other liabilities 832,032 834,643 659,401
Total liabilities 12,239,293 21,321,508 31,837,743
Subsidiary preferred shares 0 0 1,962,806
GigaMedia's shareholders' equity 115,668,461 115,634,182 146,319,109
Noncontrolling interest (338,451) (338,414) (3,591,076)
Total equity 115,330,010 115,295,768 142,728,033
Total liabilities and equity 127,569,303 136,617,276 176,528,582
GIGAMEDIA LIMITED
Reconciliations of Non-GAAP Results of Operations
Three months ended
6/30/2013 3/31/2013 6/30/2012
unaudited unaudited unaudited
USD USD USD
Reconciliation of Net Income (Loss) to
EBITDA
Net income (loss) attributable to 83,756 (1,389,060) (3,453,511)
GigaMedia
Depreciation 107,110 111,651 404,896
Amortization 490,397 500,084 557,786
Interest (income) expense (39,842) (23,337) 263,058
Income tax expense (benefit) 153 (16,570) 104,152
EBITDA 641,574 (817,232) (2,123,619)
For further information contact:
Brad Miller, Investor Relations Director
+886-2-2656-8016
Brad.Miller@GigaMedia.com
SOURCE GigaMedia Limited
Website: http://www.gigamedia.com